Data Breach Developments in California (Part 2)

Last week, we discussed three important changes to California’s data breach law that become effective January 1, 2015. Part two of this series looks at the data breach report recently released by the California Attorney General.

California Data Breach Report

In October, the California Attorney General’s data breach report presented key findings on breaches occurring in California and recommendations for lawmakers and affected industries. Notable findings and recommendations from the report are summarized below.

Data breaches are on the rise. Among other findings, the report found that the number of data breaches in California increased by 28% from 2012 to 2013, with “intentional unauthorized intrusions into computer systems” showing the biggest increase among breach categories and accounting for 53% of reported incidents.

Breaches of payment card data in the retail industry are most likely to result in fraud. The report found that from 2012 to 2013, the retail industry experienced 77 breaches, or 26% of all breaches, representing the largest share among industry sectors. Almost all (90%) of these breaches involved payment card data, which, according to the report, is the most likely data breach category to result in fraud.

Offers of mitigation services are on the rise and can be helpful to affected individuals. The report notes that after experiencing a data breach, entities are commonly offering mitigation services, such as free credit monitoring or other identity theft protection services, which can be helpful by providing advanced notice to individuals whose information is used fraudulently. However, the report found that no offers were made in 28% of incidents where the services would have been helpful. As discussed in part one, the new California law requires breach notices to include offers of mitigation services in certain circumstances.

Retailers should take action to “devalue payment card data.” Based on the finding that retail breaches involving payment card data are most likely to result in fraud, the report recommends that retailers take advantage of “promising” new technology, such as chip cards and tokenization, to enhance their security measures and “devalue payment card data.” The report also encourages retailers to implement tokenization technology for online and mobile transactions.

Lawmakers should clarify the roles of data owners and data maintainers in providing notices. Interestingly, the report recommends that the California legislature should clarify the notice obligations of owners and maintainers under the law. Specifically, the report explains that the law appears to require data maintainers to notify data owners of breaches, while the data owners must notify the affected individuals. Given this difference in responsibility, important breach notices may be delayed because the owners and maintainers may not agree on their respective obligations.